Biofuel Policy in the
United States
Madeline Milligan
December 16, 2013
Grand Challenges
Term Paper
Introduction
“Are we ever going to run out of oil? I don’t think so, but I think it will get
so expensive that we’ll stop using it as fuel and only use it for things that
it’s uniquely suited for. And our grandchildren will look back at us and
say, ‘You took a resource that took a hundred million years to make, and
you burned it for fuel! What a ridiculous use for a fragile and precious
resource like that!’” (Teall, 2006)
With continued petroleum use a non-option, the United States and the world
at large need to find a new source of energy for transportation. In recent years,
the research and development of renewable energy sources has dramatically
increased in all developed nations. Many of these nations are also pursuing
biofuels as a potential source of fuel for transportation, which could provide a
limitless supply of fuel and energy, thus eradicating problems such as limited
supply of petroleum and increased global warming.
This paper will discuss the problems with petroleum, the economic and
environmental aspects of biofuels, and the policies relating to biofuels in the
United States. It will compare different types of biofuels currently in production,
as well as analyze biofuel policies both in the United States and abroad. This
paper will culminate in an analysis of whether biofuels are the right choice for our
renewable energy future, and suggest several biofuel policies.
This paper is a research term project for a Grand Challenge foundation
seminar. The “Grand Challenges” are problems identified by the National
Academy of Engineering as those that will affect each individual on the planet in
the near future. Some challenges include providing energy from fusion,
managing the nitrogen cycle, and reverse-engineering the brain. The production
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of biofuels is, in fact, not one of the Grand Challenges, but it does have many of
the same aspects and problems that these challenges present, such as social,
environmental, political, and economic impacts. Moreover, increased biofuel
consumption will decrease carbon dioxide emissions and reduce the urgent need
for carbon sequestration, which is one of the Grand Challenges.
My research methodology consists of reviewing several books on biofuel
use and economics as well as many articles on biofuel public policy, all of which
is indicated in my bibliography. In addition, I was fortunate enough to have the
opportunity to interview two men who work in the biofuels industry. JJ Rothgery is
the Chairman of the Board at a biodiesel company located on the Naval Base in
Ventura County, CA called Biodico Inc. Russ Teall is the president and founder
of Biodico, and is widely considered one of the foremost authorities on biodiesel
and renewable fuels and energy in the world. In 2010, he was appointed to
California’s Air Resources Board to research and recommend policy for the Low
Carbon Fuel Standard and has participated twice in the last two years on the
four-person panel of the White House’s Office of Renewable Fuels for National
Security and Job Development. Biodico Inc. is one of the more successful
biobased-diesel companies in the United States and, through a Cooperative
Research and Development Agreement, has jointly developed renewable fuels
and energy technologies with the United States Navy since 2002. The Navy
supplies Biodico with used cooking oil and biomass, which is then converted into
renewable energy and biodiesel by one of Biodico’s modular and deployable
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biorefineries. Each of these energy sources is then used by the Navy in
accordance with their partnership, as well as sold to the local community.
I would have liked to be able to interview other authorities on biofuels so
that I could compare and contrast their viewpoints, but I was unable to do so due
to time constraints. Although I believe further interviews would have made my
paper more effective in understanding all sides and opinions of the issue, Russ
Teall’s interview was sufficient due to his extensive knowledge on the subject.
Problems with Petroleum
Each day, the United States consumes almost 19 million gallons of
petroleum fuel, spending approximately $1 billion on oil per day (Lefton 2010). In
fact, an individual in the United States relies so heavily on petroleum for
transportation that he or she consumes, on average, about twice as much
petroleum product as would an individual in another industrialized nation
(Pollution Issues 2013). Although most individuals are aware of the dangers of
pollution, we seem to ignore the severity of the situation at hand; there may be
more serious problems with our petroleum habits than we realize.
Take, for instance, the limited supply of petroleum on our planet. As Teall
(2006) says, burning a precious resource for fuel may not be the answer when it
becomes only scarcer with time. If we continue to burn petroleum for fuel at our
current rate, the existing supply is estimated to last us for about fifty years
(McDonald 2012). However, most economists will tell you that rather than
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draining petroleum reserves to the last drop, petroleum will eventually become so
rare and valuable that it can no longer be used as fuel.
A more pressing concern today is the pollution caused by petroleum
consumption and transportation. Most individuals are aware of the concern of
global warming, and many make an effort to reduce their carbon footprint, yet we
continue to consume and burn a resource that is one of the main causes of
global warming and respiratory illness. For example, catastrophic oil-tanker spills
represent the most visible source of petroleum pollution. These spills occur
during the transportation of crude oil from one nation to another and release vast
amounts of petroleum into the local ecosystems, which we often see in
disheartening pictures of oiled birds and sea animals and oil-coated shorelines.
However, what we do not see is the majority of the petroleum-related pollution,
which comes from petroleum-fueled vehicles, engine emissions, and industrial
processes (Pollution Issues 2013). Petroleum-fueled transportation is considered
one of the chief causes of global warming; petroleum extraction and consumption
release large amounts of carbon dioxide and methane into the atmosphere,
which contributes greatly to the greenhouse effect that increasingly threatens our
planet.
Even for those who are not convinced of global warming, there are still
other reasons to cut back on our petroleum consumption. Each day the United
States spends approximately one billion dollars buying crude oil from foreign
governments, especially in the Middle East. This money in turn funds corrupt
regimes and anti-American tendencies abroad while further endangering our
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national security. The more money we funnel into these untrustworthy
governments, the greater are the chances that they can take action against the
United States in the future.
Furthermore, since the United States’ dependence on crude oil began,
almost every conflict that the United States’ military has been involved in was
related to protecting our supply of oil. Take, for example, the Gulf War, which
was all about oil access, prices, and profits (History.com). The U.S. intervened in
a Middle Eastern conflict in an effort to protect its investments and access to
crude oil in Kuwait and Saudi Arabia from the Iraqi invasion (MER 1991). That is
not to say that that the intervention was unnecessary; it may have been the only
way to guard the Kuwaiti and Saudi Arabian oil production to which the United
States had access, but the U.S. intervened due to its dependence on oil. While it
is not necessary to dwell on the specifics of war declarations and the U.S.
military, suffice it to say that the United States has gone above and beyond what
its people anticipated for it to maintain its access to huge amounts of crude oil
around the world. This military intervention has caused the loss of thousands of
lives and has cost the United States government billions of dollars, all of which
could have been put to better use at home.
Interestingly enough, vehicles were never intended to run on petroleum. At
the start of the twentieth century, Henry Ford planned to fuel his Model T’s with
ethanol, a liquid fuel made from corn (National Geographic 2013). Early diesel
engines ran on another renewable fuel, biodiesel, made from peanut oil. These
two fuel types fall under a broad category of biofuels, which may be the solution
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to our petroleum problem. Discoveries of huge petroleum deposits kept diesel
and gasoline cheap for decades, but with the recent rise in oil prices and the
growing concern of global warming, biofuels have been regaining popularity. In
2013, the US Energy Information Administration announced that renewable fuel
is growing at a faster rate than fossil fuel use. In 2013 alone, ethanol production
will exceed 13.4 billion gallons and biodiesel over 1.7 billion gallons.
What are biofuels?
Biofuels are liquid fuels that have been derived from materials other than
crude oil as a feedstock, such as agricultural products, waste biomass, and
animal fats. They are substitutes for nonrenewables that take advantage of their
natural energy content to produce a fuel that can be used to run internal
combustion engines (Cornell University 2013). These fuels can be made from
many types of organic matter, such as corn, switchgrass, algae, soy, canola,
castor, and recycled cooking oils, and can be divided into different “generations.”
Initially, conventional biofuels were made mainly from starches, sugars, or
vegetable oils (Earley 2009). These biofuels tended to be made from products
that we also use as a food or feed source.
The United States is currently the world’s largest producer of conventional
biofuels with more than 13.47 billion gallons of ethanol production per year from
corn. Brazil follows in second place, making ethanol from sugar cane, with nearly
7.1 billion gallons of biofuel produced each year. When combined, these two
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nations represent 82% of ethanol production capacity in operation worldwide (PR
Newswire 2011).
Literature review
Theoretical benefits of biofuels
Biofuels are often considered a superior environmental choice to
petroleum, at least in theory, although there are several factors that can affect
the United States’ and other countries’ economies as well. While petroleum is a
finite resource, biofuels are renewable and have the potential to supply a
constant reserve of fuel for both diesel and ignition engines. Were biofuels to
replace petroleum fuel, the United States would no longer be dependent on oil
from other nations. Instead, the $1 billion dollars spent on oil each day abroad
could be invested at home in improving our own economy and stimulating growth
in the renewable energy field (Fuel Freedom 2013).
In addition, as the developed world is acutely aware of the dangers of
global warming and carbon dioxide emissions, biofuels become an increasingly
attractive alternative. When in use, most biofuels release minimal or no carbon
dioxide and can help remove existing carbon dioxide from the atmosphere.
Increased use of biofuels as an alternative to petroleum could therefore reduce
the amount of carbon dioxide released into the atmosphere and mitigate the
issue of global warming altogether (Skye 2013).
In addition to reducing dependence on foreign oil and mitigating global
warming, many experts expect that the biofuel industry could fuel economic
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development in poor, rural areas and regions of the United States as well.
Production of biofuels abroad can offer new industries to developing nations,
which can help raise these nations and their people out of poverty by providing
job opportunities and the potential to stimulate growth in the economic sector.
For example, biofuel in Tanzania is made from a shrub called cassava.
Government investment in the production of biofuel could help to reduce poverty
in a nation where 80% of the labor force consists of farmers; this could help
reduce Tanzania’s poverty rate by up to 5% in the next ten years (Mousdale
2010). At home, the biofuel industry has helped communities by creating higherpaying jobs for a significant number of individuals, both skilled and unskilled.
According to the Biotechnology Industry Organization (2013), the biofuel industry
could create up to 190,000 direct green jobs and 610,000 indirect jobs.
Furthermore in the last decade alone, the biodiesel production in the United
States has increased from 500,000 gallons to over 1.7 billion gallons in 2013,
adding $6.28 billion to the gross domestic product (National Biodiesel Board
2013).
The use of biofuels could, in fact, mitigate other problems that the National
Academy of Engineering has identified as Grand Challenges. Take, for example,
the development of carbon sequestration methods. If biofuels were to be as
efficient as they could be, they would successfully remove carbon dioxide from
the atmosphere during growth and emit none during production and use; this
means that the use of biofuels could be considered a method of carbon
sequestration in itself. Using biofuels as carbon sequestration could effectively
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solve several problems at once: the United States can reduce our use of oil,
meaning we no longer emit large amounts of carbon dioxide each day, and we
would not have to go to such extreme measures as burying carbon dioxide from
the atmosphere underground or beneath the ocean, which would cost billions of
dollars in research, development, and production (NAE 2012).
Types of biofuels
There are different types of biofuels available in the world: first-, second-,
and third-generation biofuels (Cornell University 2013). These generations of
biofuels are categorized by their feedstock, meaning the raw material used to
produce the fuel. First-generation biofuels are by far more common in the United
States and the world at large, and are produced from sugars and starches, such
as corn. Many of these first generation feedstocks are typically found in organic
matter that humans and animals also use as a food source, which fueled the
initial concerns of using food as a feedstock (Earley 2009).
Although not as common, there are divisions of biofuels that have been
made in smaller quantities in biofuel-producing regions. Second- and thirdgeneration biofuels, also called advanced biofuels, are produced from
sustainable feedstocks, meaning those that cannot be used for food, such as
algae, switchgrass, and fast-growing trees. These fuels are often considered
superior to first-generation biofuels because they do not conflict with the prices
and consumption of food materials, such as corn and grain. Together, these two
types of biofuels have the potential to displace large quantities of petroleum to
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better the environment and mitigate the effects of global warming and respiratory
illness.
Ethanol
The term “ethanol” in this context refers to bioethanol, any ethanol
produced from plants such as corn or sugar cane that can be used as an
alternative to gasoline. In the United States, nearly all ethanol is produced from
corn. In 2012, the U.S. produced about 13.3 billion gallons of ethanol, which was
mostly blended with gasoline and sold for use as fuel across the nation, up from
just 1.62 billion gallons in 2000 (U.S. Energy Information Administration 2013).
Until recently the effects of ethanol on the U.S. job creation have been
mixed: each new refinery plant creates about 200 jobs nearby but still the food
vs. fuel debate continues in circles. However, the USDA announced in December
2013 that corn consumption is forecasted to be stronger than expected in 2014
due to increased demand for the crop for ethanol. As ethanol and foreign
consumers have increased demand for the crop, users may take advantage of
cheaper prices to increase corn-based fuel. For example, corn prices are seen
averaging $4.40 through August of next year compared to $6.89 in the prior
marketing year (Des Moines Register 2013). Furthermore, one study estimates
that renewable transportation fuels could lead to more than 1.2 million new green
energy jobs by 2038, although that figure takes into account all types of biofuels
and not just ethanol (Earley 2009).
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Ethanol and all biofuels are considered environmentally friendly because
they emit fewer greenhouse gases than gasoline and petroleum diesel. Ethanol
does burn cleaner than gasoline and creates fewer toxic emissions because it
does not contain significant amounts of toxic materials such as benzene and lead
(Pollution Issues). Theoretically, biofuels can be zero-carbon or carbon-negative
energy sources because many potential feedstocks store carbon in their roots
systems and in the soil. Ideally, the increased use of ethanol could not only
decrease the amount of carbon dioxide emitted each year but also decrease the
amount of pre-existing carbon dioxide in the atmosphere due to the absorption of
carbon dioxide. In addition, ethanol can be used in already-existing vehicles,
meaning that the switch to biofuels could come at no cost to the consumer.
Currently, consumers may be fueling their vehicle with ethanol and not even
know it; almost all of the gasoline that Chevron, a major oil company, sells
contains some amount of ethanol (Chevron 2013).
Problems with ethanol
Corn ethanol was initially thought to have a negative carbon dioxide
emission rate, meaning that it would remove more carbon dioxide from the
atmosphere than it emitted over its lifetime. However, this was proven to be
untrue due to the dependence on fossil fuel inputs for producing and
manufacturing ethanol. Although corn absorbs carbon dioxide from the
atmosphere as it grows, the energy required to produce ethanol still emits large
sums of carbon dioxide into the atmosphere. In many cases, ethanol emits less
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carbon dioxide than gasoline. However, in places where coal is used to power a
refinery, the lifecycle carbon dioxide emission has been higher than all forms of
renewable energy but still less than that of gasoline.
In some parts of the world, the conversion of cropland from food to biofuel
feedstock has become a serious concern across the globe. There has been a
strong link between the expansion of the biofuels program in the United States
and the global conversion of land to agriculture in Asia and, in particular,
Indonesia and Malaysia. However, in the United States, the farming industry has
balanced its land use to the satisfaction of the USDA (Des Moines Register
2013). At the same time, the controversy continues in certain competitive circles.
Critics of corn ethanol have also blamed the ethanol producers for the hugely
volatile price of corn as food over the last few decades. Rising ethanol production
has led to a sharp increase in the U.S. demand for corn. Critics contend that
prices have continued to go up, however USDA statistics refute these
statements, which were perceived to be true as recently as five or six years ago
prior to in-depth analysis. Russ Teall, an authority on biofuels in the United
States, argues that we need to distinguish between food-based feedstocks for
biofuels and non-food-based feedstocks, insisting that corn is not grown
exclusively for food, outside of the biofuel industry. He indicates that most of the
corn grown is really used for feeding animals, not humans, meaning that it does
not directly impact the human food supply; when ethanol is made, the production
process extracts the sugars and oils and what remains is a protein-rich product
that can still be used as animal food (Teall 2013). Thus, he believes that it is
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possible to continue to produce ethanol from corn without directly impacting the
human food supply. All that is necessary is that both sides, the biofuel industry
and the cattle and/or agriculture industry, recognize the potential for corn as both
a renewable energy and an animal feed.
Corn ethanol has been accused of many serious defects, including raising
prices of corn, increasing the conversion of land to cropland, and emitting large
amounts of carbon dioxide over its lifetime, and yet it continues to be used in
increasing amounts in the United States each year. There are many reasons for
this, the main reason being the ever-increasing mandates for biofuel. Policy in
America indicates that each year, more and more renewable fuels will be
blended with gasoline each year until they eventually take over as our main fuel
source and replace gasoline.
Why do we continue to mandate the use of biofuels in the United States?
It is believed that mandating the use of biofuels will spur the development of
better, more efficient biofuels, such as cellulosic ethanol and other advanced
biofuels, in the United States (Runge 2010). In fact, most studies support efforts
in U.S. policy that would make biofuel production more environmentally
sustainable by spurring the rapid development of cellulosic derived fuels and
biogas along with other advanced biofuels that would reduce greenhouse gas
emissions (Earley 2009). While there is no guarantee that large-scale production
of advanced biofuels would be environmentally beneficial because it has not yet
been achieved, current assessments show much promise for the future of
advanced biofuels.
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Advanced biofuels
Advanced biofuels are a broad category of renewable fuels, consisting of
second- and third-generation biofuels. Second-generation biofuels are primarily
made from inedible plant materials, while third-generation biofuels are made from
algae and other microbes. All advanced biofuels use feedstocks that do not affect
the supply of food for humans across the globe. They are renewable fuels other
than ethanol that, over their entire lifecycle, produce greenhouse emissions that
are 85% less than the lifecycle emissions of gasoline and petroleum diesel
(Gecan 2010).
Biotechnology companies today continue to develop advanced biofuels
from cyanobacteria, algae, municipal waste, animal fats, and more. These fuels
made great strides towards commercial development when incorporated into the
U.S. mandated program in 2008 by the Renewable Fuel Standard (RFS) that
helped to spur development of alternatives to petroleum-based fuel. Today, the
U.S. Environmental Protection Agency has approved 19 different methods for
companies to produce and sell renewable fuels made from food and non-food
sources, although there are still more than 30 applications awaiting review
(Erickson 2013). These feedstocks could provide us with a permanent,
renewable, cleaner alternative to petroleum-based fuels, although not without
policy changes to encourage their production and use in the United States.
Cellulosic ethanol-based fuel
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Cellulosic ethanol is considered to be the future of ethanol production and
ultimately the most popular biofuel in the United States. Currently its use is
encouraged by tax credits and mandates, although in smaller quantities than
corn ethanol (Earley 2009). Cellulosic ethanol is produced from grasses, woods,
the inedible parts of plants, and more. Because its feedstock cannot be used for
human food or animal feed, it is considered an advanced-generation biofuel.
Cellulosic ethanol has the advantage of abundant and diverse feedstock
compared to ethanol, which requires corn or cane sugars, but requires a greater
amount of processing. Cellulose is contained in nearly every natural plant, tree,
and bush, meaning that that it grows all over the world without any agricultural
input, making it the most abundant organic compound on Earth.
Cellulosic ethanol is expected to be less expensive and more energyefficient than today’s ethanol, and is anticipated to further diminish carbon
dioxide emissions, water use, and food supplies. In contrast to ethanol, biodiesel
requires much less water per gallon of fuel produced, although the amount of
water required for irrigation varies somewhat by feedstock (Earley 2009).
Because cellulose is contained in nearly every plant and is not used for food, it
will have no impact on the price of food around the world and can be found or
cultivated in any region (Earley 2009). In addition, cellulosic ethanol is expected
to emit far less carbon dioxide than ethanol. The majority of carbon dioxide
emissions from ethanol come from the harvesting of corn. By contrast, the
harvesting of cellulose such as corn stover, the leftover stalks, requires little
15
carbon dioxide emission beyond the harvesting of the corn itself for food, thus the
fuel would have a lower carbon emission rate than ethanol from corn would.
Cellulosic ethanol can be made the same as it is today from corn,
although it requires that the tightly bound sugars in the plant fibers be broken
down by enzymes prior to fermentation. While cellulosic ethanol is a phenomenal
choice in theory, breaking down the sugars at a low cost has been the principal
obstacle to the commercial development of cellulosic ethanol.
In 2011,
commercial production was achieved, however it is expected to be another three
to four years before it will approach the current production of corn or sugar cane
based ethanol. The enzymes that have been so far made for this purpose have
been genetically improved from those of natural organisms. For example, one
promising source of enzymes comes from termite intestines (Energy Future
Coalition 2007). Termites sustain themselves by converting cellulose to sugars,
so it is expected that researchers can modify their internal enzymes to do the
same thing outside of the termite’s body. The cost of producing these types of
enzymes has to drop from its 2007 price of around 18 cents per gallon of ethanol
produced (Energy Future Coalition 2007). Over time, and as technology
improves, the cost of producing cellulosic ethanol will drop even further.
Policies in the United States
The United States’ policies regarding biofuels began in the early 1990s
when the government began to look more closely at biofuels as a way to reduce
dependence on foreign oil and decrease the nation’s overall carbon footprint.
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Since then, production of biofuels has increased and biofuel policies have since
been refined, focusing on creating the most efficient fuels available that can
compete with petroleum-based fuels, as well as making them more common and
economically viable.
The two main tools in the United States to increase biofuel production and
use are tax credits and mandates. Currently, the federal government has several
tax credits available for the production and blending of biofuels, meaning an
amount that can be deducted from a person’s total tax liability (EPA 2013). The
major federal biofuel tax credits are for ethanol, cellulosic ethanol, and biodiesel.
Producers of biodiesel that meets federal regulation standards can receive a
$1.00 per gallon tax credit upon use or sale of the fuel; blenders who purchase
biofuel cannot claim credits themselves. Producers of cellulosic biofuel receive a
$1.01 per gallon credit (EPA 2013). The goal of the tax credit program is to make
it economically feasible for producers to research, develop, and produce these
biofuels, as well as to make the final product cost-competitive with petroleumbased diesel.
The Energy Policy Act of 2005 imposed the first renewable fuel standards
in the United States, which mandated that gasoline producers and importers
blend a specified minimum volume of biofuel with gasoline to meet an annual
standard for the use of biofuels, extended through 2012. The specified minimum
volume increases each year through 2022, when the final biofuel mandate will
total 36 billion gallons of biofuel, 21 billion of which must come from advanced
biofuels (EPA 2013). The Energy Independence and Security Act of 2007
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amended those standards to require even larger annual volumes of biofuels and
the mandates through 2022. The idea is that, over time, the biofuels industry will
become financially independent and a leading fuel in the United States. The
actual amount of each type of biofuel mandated each year can be seen in the
figure below, taken from the University of Illinois Urbana-Champaign website.
The mandate also provides biofuel producers with some degree of
confidence that a market for their fuels would exist, thereby encouraging
investment in research and development as well as the construction of facilities
needed to produce them (Gecan 2010). The EPA has since established blending
requirements for each type of biofuel using estimated projections of fuel use in
the United States. Fuel vendors must meet the requirements by mixing biofuels
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with gasoline or diesel for direct sale or by purchasing credits from another
vendor that has blended more biofuel with petroleum-based fuel that is required
of the petroleum companies and petroleum importers by law (EPA 2013).
Policies abroad
Many countries around the world have biofuel policies. Brazil has been
consuming ethanol as an automotive fuel for more than thirty years, and currently
ranks second to the United States in biofuel production, yet biofuel use and
consumption in Brazil is much more efficient and common than it is in America.
Brazil is the only country where biofuels are truly competitive with oil derivatives,
both in use and in price. All gasoline sold in Brazil is actually gasohol, some
combination of gasoline and ethanol in varying ratios, and almost all fuel sold
contains at least 25% ethanol (Walter 2009). However, instead of producing
ethanol from corn, as is done in the United States, Brazilian ethanol is made from
non-food grade sugarcane, which is locally in abundance. Because sugarcane is
so abundant, ethanol is currently able to cover more than 30% of the energy
demand of the automotive transportation of the country and its use is projected to
rise remarkably in the years to come. By comparison, ethanol production was
about 10% of total fuel use in the United States in 2012 and 2013.
The Brazilian biofuels program, PROALCOOL, was created in 1975 with
the goal of displacing gasoline in automotive transport. At the time, the country
was heavily dependent on foreign oil, just as the United States is today. Between
1975 and 1985, about 11-12 billion US dollars were invested in creating a
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structure able to produce 16 billion liters, about 4.2 billion gallons, of ethanol per
year (Walter 2009). The program showed success until the Brazilian government
reduced support in 1985, after which the ethanol market faced difficulties. The
most clear, positive results began in 2001, when, due to a substantial price
difference between ethanol and gasoline, and the sale of flex fuel vehicles
(FFVs) increased. The main advantage of these vehicles is that their engines can
operate with any fuel mix between regular gasoline (in Brazil, a mixture of 25%
ethanol and 75% gasoline) and pure hydrated ethanol. FFVs are the norm in
Brazil, and all car manufacturers based in Brazil have at least one FFV model
available and some manufacturers produce only FFVs (Walter 2009).
The Brazilian ethanol market was induced in 1975 by mandates, similar to
those in the United States today. That year, a mandate for an E20 fuel blend was
established, meaning that all fuel sold had to contain at least 20% ethanol,
although it took until 1980 for that to become a reality. Over the years, the share
of ethanol in the fuel blend has increased to its current E25 minimum (Walter
2009). In addition, Brazilian taxes have a strong impact on the fuel price to
consumers. Direct subsidies were completely eliminated in the early 2000s, but a
tax exemption policy is in place. A part of the benefit of ethanol use for
consumers is lower taxes applied to ethanol than gasoline. The taxation applied
to diesel is even lower than the taxation applied to ethanol (Walter 2009).
The Brazilian biofuel program appeared to take a two-pronged approach.
First, it mandated the use of some amount of ethanol in all gasoline sold. This
guarantee assured anyone interested in producing biofuels that there would
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always be a market for biofuel in the future, thus they would not be investing in a
lost cause. Second, Brazil had evolved a competitive, consumer-led dual-fuel
economy where consumers made choices based on the relative prices of
gasoline, ethanol, and blends (Walter 2009). The government recognized early
on that for biofuels to become a reality, they needed to be price-competitive with
gasoline and also work in the existing gasoline-powered engines. With the lower
taxes applied to ethanol than gasoline, this became a reality, and consumers
have thus been observed to buy ethanol when the pump price is lower than that
of gasoline (Mousdale 2013). However, during the fuel crisis in the mid-1990s,
ethanol prices were close to 65% less than the price of gasoline per volume and
consumers were more likely to purchase ethanol than gasoline. That crisis
helped encourage consumers to buy biofuels because they were able to try out
the new product in a time when it was a more economical decision. Once
consumers were able to recognize that the gasohol worked just as well as the
gasoline they were used to, they were comfortable using ethanol in their vehicles.
Their choice between gasoline and ethanol was based only on the price of the
two and not of their understanding of the fuel, or lack thereof in the case of
ethanol.
Diffusion of biofuels
Everett M. Rogers’ framework (Rogers 1982) for determining the rate of
adoption of innovations can be used to estimate the success of biofuels in a
given society. There are five perceived attributes of innovations, all of which help
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determine the potential of an innovation to diffuse within a given society. These
five attributes are as follows: relative advantage, compatibility, complexity,
trialability, and observability. Relative advantage refers to the benefits and
disadvantages of a new product over existing products. Compatibility is
concerned with the consistency of the product with adopter values and social
systems. Trialability, although not a word, refers to the ability of a consumer to
test out the product without high initial costs, training, or process changes.
Finally, observability pertains to the ability of the product to be observed by
consumers, namely, how easy it is for these potential adopters to see the product
in action.
Relative advantage:
Nearly all aspects of this paper so far have discussed factors related to
biofuels’ relative advantage over the current choices for fuel and energy. When
produced in a sustainable manner, biofuels can be enormously beneficial to the
environment and our National security. In addition, the raw materials for biofuels
are completely renewable, meaning that we could make fuel from these
feedstocks without worrying about running out of our main source of energy.
Furthermore, the production of biofuels in the United States has thus far been
advantageous for our economy and consumers (Walter 2009).
However, biofuels have perception problems that have not been
completely worked out yet. A great deal of misinformation about biofuels has
been spread throughout the country, largely funded by big oil companies that
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would prefer to control the biofuels industry rather than compete against a new
major fuel source (Rothgery 2013). Further, many people in the U.S. believe that
increased ethanol production will lead to a spike in the price of corn throughout
the world, although this has been refuted by the USDA (Des Moines Register
2013). Whether or not this is true, this information is something that would be
considered a serious barrier to increased use of first-generation biofuels.
Compatibility:
Biofuels can be considered compatible with the general values and
standards of our society. They are beneficial for the environment and mitigate the
effects of global warming and respiratory illness, a huge asset in a world
increasingly focused on the environment and green energy. However, more
important than their compatibility with our social system is biofuels’ compatibility
with the preexisting infrastructure that currently supports the use of petroleum
fuels. Even now, most fuel sold by companies like Shell and Chevron includes
some mixture of ethanol in their gasoline, meaning that ethanol and other
biofuels are already compatible with our current transportation and fuel
distribution and sales system.
Other big oil companies, however, fight the
increasing use of biofuels in the United States by making it appear as though
biofuels are not compatible with our societal values. Many of the most influential
cases that spread incorrect information about biofuels, such as suggesting a
negative effect on our economy or carbon emissions, have been funded by big oil
companies that do not want to lose business to a new industry. In this way, some
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oil companies are leading the public to believe, incorrectly, that biofuels are
against our societal values, and thus should not be encouraged.
Complexity:
While biofuel production may be difficult to understand on its own, the use
of biofuels use is simple and requires no more work than purchasing and fueling
a vehicle with a petroleum-based fuel. Thus, the complexity of using biofuels is
no different than that of gasoline or diesel.
Trialability:
Biofuels have the advantage of being very easy to test out without high
initial costs or process changes. In fact, many people are using biofuels each day
without even realizing it. Billions of gallons of first- and second-generation
biofuels are blended with gasoline each year in accordance with the biofuel
mandates set by the federal government. The use of pure biofuels, such as
biodiesel or ethanol, may require a slight process change. Most fueling stations
do not offer a 100% renewable alternative, only a blend. To purchase a purely
renewable fuel source, one must often contact a distributor directly.
Observability:
One of the main reasons that biofuels are not well known in our society yet
is their lack of observability, however their visibility has increased exponentially in
recent years. Few companies advertise biofuel sales at each individual station,
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even though many of them sell blends of ethanol with gasoline and diesel
blended with petroleum diesel. At the same time, it is difficult to observe biofuels
in use because they work the same way as gasoline or diesel in any motor
vehicle.
Several other variables from Rogers’ framework can help determine the
rate of adoption by a society. Some of these aspects include the mandatory
versus optional criteria, change agents, and communication media. Currently, a
certain amount of biofuels is mandated each year, meaning that the blending of
biofuels in gasoline and diesel is not optional. It is, however, optional for
consumers; they are not required to buy biofuels blended with gasoline, but they
usually are not aware that what they are buying actually contains biofuel. Change
agents, or people who serve as catalysts for change, unfortunately do not exist
for biofuels in the same numbers as the petroleum industry. More often than not,
biofuels are portrayed in a negative light by the media due to their perceived
adverse effects on the price of corn and other corn-based foods. The media has
been known to ignore the positive impact of biofuels on our nation’s carbon
footprint and economy, and choose only to focus on the glut from misinformation
campaigns. As previously mentioned, big oil companies are willing to fund these
campaigns against biofuels in an effort to maintain their overall monopoly of the
fuel industry, conventional or renewable (Rothgery). The information beneficial to
biofuels as a whole covered by the media is usually from U.S. Government
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agencies such as the Departments of Energy, Agriculture, Defense, and the EPA
(Rothgery).
Conclusion
Suggested biofuel policies
According to Russ Teall, the greatest problem that the United States has
had with biofuel policy is inconsistency of those policies between government
administrations. Different governments do not always support biofuels and
renewables, so it is usually only sustained during certain administrations and
time periods, and then is lacking when the government does not subsidize the
biofuel industry as it has the oil industry since the 1930s. In order to form a longterm capital market for these fuels, it is important to have some sort of
consistency. According to JJ Rothgery, the policy inconsistencies appear to be
just that: political. He suggests that common sense dictates that the United
States should be supporting biofuels, but lobbyists who have undue influence
ever renewable fuel policy want to quash it, which makes it difficult to pass probiofuel policy that supports their production and use. Fortunately, biofuels have
received significant bipartisan support because one could look at it in terms of
both energy security, which Republicans like, and environmental improvements,
which Democrats support (Teall 2013). These two groups need to come together
to support biofuel production, specifically that of advanced biofuels, on a large
scale and throughout the United States.
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One option for the U.S. would be to look at the successful programs
initiated in Brazil that we do not already employ. Our policies are not far behind
and have the same type of blend mandate, but our ethanol should be coming
from non-food feedstocks instead of corn. While ethanol has been very
successful in Brazil, we do not have the same abundance of feedstock that they
do, thus we need to take a concerted approach to advancing cellulosic ethanol
production to achieve fuel independence. Furthermore, the federal government
should increase its effort to encourage consumers to make the right choice in
fueling with renewables, yet studies have shown that consumers will not be
inclined to do so unless the price of biofuels is competitive with or lower than that
of gasoline or diesel, which it has been since mid-2012. Thus, the government
should do more to keep the price of all biofuel lower. By continuing tax subsidies
for biofuels like the Brazilian government has (Mousdale 2013), the United States
could encourage a competitive, consumer-led dual-fuel economy similar to that of
Brazil.
Alternatively, the entire United States could follow in the footsteps of
California and adopt its Low Carbon Fuel Standard (LCFS), which uses a marketbased cap and trade approach to lowering greenhouse gas emissions throughout
the state. The LCFS requires that producers of petroleum-based fuels reduce the
carbon intensity of their products. By 2011, the state required the fuel industry to
reduce its carbon intensity by a quarter of a percent, and they are expected to
reduce the carbon intensity by a full ten percent in the years in 2020. The carbon
intensity of an energy source is measured in grams of CO2-equivalent per mega
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joule and measures the direct emission value of each fuel. Petroleum importers,
refiners, and wholesalers may either develop their own low carbon fuel products
or purchase LCFS Credits from other companies that produce alternative fuels,
electricity, natural gas, or hydrogen (CA Energy Commission 2013). In addition,
the LCFS establishes an implementation schedule to ensure that all producers of
petroleum-based fuels are decreasing their carbon intensity on time. This
program could be applied to the entire United States to encourage the use of
biofuels by discouraging, and in fact prohibiting, over a certain amount of carbon
dioxide emissions. The entire program would be beneficial for the environment as
well as the economy.
Are biofuels the right choice?
Although many people have suggested that biofuels are not the right
choice for America, what these people fail to realize is that the country needs a
future energy source as a supplement to, and within the next 50 to 75 years, a
replacement for fossil fuel. Even if one were to disregard all the negative impacts
that our oil usage has thus far had on the environment, petroleum is not going to
last us forever. The United States must anticipate the future by building an
infrastructure to produce renewable transportation fuels. While ethanol may not
be the right choice in the long term, all indications are that an ever-increasing
production of cellulosic ethanol and other advanced biofuels is the right choice.
However, the research and development necessary to continue production of
these fuels from non-food feedstocks requires funding and support from the
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federal government. It is necessary to shorten the process and make it a reality
far sooner. The economic support will continue to assure that the price of
advanced biofuels will remain competitive with gasoline and petro-diesel until the
biofuels industry is financially self-sustaining. With continuing research and near
term federal support, the biofuels industry in the United States could actually
diminish the effects of global warming, further increase our national security, and
improve the quality of air we all breathe while creating jobs and adding multibillions of dollars to the US economy annually.
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